In an unpublished decision in the case of Thelma Nelson v. Bank of America, N.A., Case No 11-11091, Docket No. 6:10-cv-00929-MSS-DAB (11th Cir. Oct. 31, 2011) the U.S. Court of Appeals for the Eleventh Circuit affirmed per curium a finding of the District Court for the Middle District of Florida, that a debtor has no private right action against a lender for the lender’s alleged failure to comply with the requirements of HAMP.
The Court observed:
“[N]othing express or implied in HAMP gives borrowers a private right of action.”
Thus, while borrowers may complain that a lender did not provide a permanent modification after the temporary period, or that the lender otherwise did not follow HAMP procedures, it appears that the borrower may not have any right to compel the lender to comply.
For a PDF of the Eleventh Circuit’s Opinion, click here.
The Georgia Supreme Court, in the case of Bailey v. Moten, Case No. S11A01260 (Ga. Oct. 17, 2011) unanimously affirmed the decision of the Coweta Superior Court which held that a Mrs. Josephine Bailey had not adversely possessed some land adjacent to her house and surrounding lot.
The Georgia Supreme Court observed that Bailey had not cultivated the property or erected any structure or fence upon it.
Bailey Claims To Have “Enclosed” Property Via “Vegetation Lines”
But, Mrs. Bailey claimed to obtained prescriptive title because:
- Bailey had periodically used the property for family gatherings,
- in 1974 or 1975, Bailey and her husband caused the subject property to be cleared of wild vegetation, and
- she had allegedly “enclosed” the property because of:
- a pre-existing fence situated at one end of the subject property, and
- the “vegetation lines” caused by the clearing and periodic mowing of the property.
Special Master Justified In Finding “Vegetation Lines” Give Insufficient Notice to Landowner of Adverse Possession
“Something there is that doesn’t love a wall”
“Good fences make good neighbors”
The full text of the decision follows: Read more on “Vegetation Lines” Where Land Cleared Deemed Insufficient Notice For “Adverse Possession” To Land…
Landlords frequently have a lease agreement personally guaranteed by another party. But how does a landlord ensure that the guaranty is enforceable?
This issue recently came up when TDC-Berkeley Lace, LLC leased space for a Three Dollar Cafe from the landlord Hong Investments, LLC. The manager of TDC-Berkeley (Michael Sarsfield) was asked to sign a personal guaranty for the lease.
Problem when Guaranty Does Not Identify Lease
The problem was that the parties used a form personal guaranty which promised to pay the “Landlord” rent if the “Tenant” defaulted on the “Lease”. But none of these words were defined ! So, looking at the Guaranty by itself, it was impossible to tell what lease was being guaranteed.
There is authority that, any promise to answer for the debt for another must “identify the debt, the principal debtor, the promisor, and the promisee” and that, if “any of these names is omitted from the document, the agreement is not enforceable…” LaFarge Building Materials v. Pratt, 307 Ga. App. 767, 768-769, 706 SE2d 131 (2011).
In the case of TDC-Berkeley Lace, the trial court applied this authority and found the personal Guaranty by Mr. Sarsfield unenforceable. Thus, simply because of a simple problem of having a poorly drafted Guaranty, the landlord might lose thousands of dollars!
Guaranty Found Enforceable In This Case Because of “Contemporaneous” Execution
But, while not changing the general rule, the Georgia Court of Appeals put Mr. Sarsfield back on the hook in this particular case, noting the following factors:
- the Lease and Guaranty at issue were signed within one day of each other,
- the same notary stamped both documents,
- Mr. Sarsfield signed the Lease on behalf of his company, and
- the form of the Guaranty was an exhibit to the Lease.
The reasoning was also “result oriented;” it appears from the outside that the parties intended Mr. Sarsfield to be a personal guarantor, and the Court of Appeals may have been reluctant to have the landlord incur a loss on a ‘technicality’.
As long as there have been personal guarantees, there have been attempts by debtors to escape from liability once called upon to pay. And over the course of hundreds of years of English and American jurisprudence, several defenses to guarantees have become embodied in our law.
But, many of these defenses and escape routes can be avoided by including particular disclosures and waivers in the Guaranty.
In the case of TDC-Berkeley Lace, the landlord ultimately was successful in the Court of Appeals in finding the Guaranty enforceable under the particular circumstances of this case. But the landlord was only successful after incurring thousands of dollars in attorney’s fees in both the trial and appellate courts, and having to wait an extended period of time.
The better practice would be to avoid the argument, and ensure that the Guaranty form will specifically “identify the debt, the principal debtor, the promisor, and the promisee.”
Is it time to have an attorney update your forms?
The full text of the decision follows: Read more on Best Practice: Payment Guaranty to a Lease Should Specifically Identify The Landlord, Tenant and Lease…
City of Marietta Violated Federal Law
The United States Court of Appeals, Eleventh Circuit recently held in the case of Covenant Christian Ministries, et al. v. City of Marietta, Georgia, that a 2004 City of Marietta zoning ordinance facially violated the Land Use and Institutionalized Persons Act (RLUIPA), 42 U.S.C. 2000cc.
Marietta’s 2004 Ordinance prohibited all religious institutions in a number of residential zoning districts, including the R-2 Residential classification. But the 2004 Ordinance permitted private parks, playgrounds, and neighborhood recreation centers.
Landowner Entitled to Damages
Writing for the Court, Judge Cox found the 2004 Ordinance to have treated religious assemblies less favorably than non-religious assemblies, and held that “the 2004 Ordinance facially violates the equal terms provision of RLUIPA.”
Nevertheless, given the way the 2004 Ordinance was severed, “Covenant obtained no vested right under Georgia law to build a church in the residential zone.”
The City of Marietta passed another ordinance in 2008 which changed the law. While the 2008 change rendered Covenant Christian’s claim for injunctive relief moot, the Eleventh Circuit held that the district court did not err in awarding nominal damages to Covenant Christian.
What was really going on in this case? According to the Eleventh Circuit, Covenant Christian Ministries “planned to build an 800-seat church, a school to accommodate 500 students, a gymnasium, and an activity field.” Understandably, the City was trying to protect the residential character of neighborhoods from the sudden influx of traffic, noise, etc.
But the City did not do so in an even-handed way. A neighborhood recreation center (permitted under the 2004 Ordinance) might have had a gym or activity field, which would also tend to cause traffic and noise. But the City did not prohibit secular entities from doing so.
I grew up near Marietta, and given my experience regarding this area, I seriously doubt that the City had any animus towards religion in the abstract.
But this decision is a reminder that governments should not act hastily in drafting legislation, and should work to be even-handed in their treatment of different groups.
The full text of the decision follows: Read more on 11th Circuit: City of Marietta Ordinance Violated Religious Land Use and Institutionalized Persons Act…
On October 13, 2011, the Georgia Court of Appeals, in the case of Dillon v. Reid, held that a Georgia trial court is not preempted from issuing an injunction to require a lot owner to move a dock, although the Corps of Engineers manages the shoreline of Lake Lanier and issues dock permits.
In this case, Danny Reid sued his neighbors, Michael and Jennifer Dillon. Reid wanted to seek a permit for a dock. But, because his neighbors on the left and right (respectively, the Dillons, and the owner of Lot 10) had placed their docks too close together, Reid would not be eligible. So Reid sued the Dillons, seeking an injunction requiring that the Dillons move their dock at least 132 feet away from the dock on Lot 10. If an injunction did not issue quickly, then Reid would miss the window of opportunity to apply for a dock permit.
Forsyth Superior Court Judge Brenda S. Weaver held an evidentiary hearing, and found that the placement of the Dillons’ dock was in violation of an earlier Sale Agreement, found that Reid was a third party beneficiary of the Sale Agreement, and ordered that the Dillons move their dock.
The full text of the decision follows:
The Georgia Supreme Court has granted certiorari and agreed to review a March 2011 Court of Appeals decision in The Landings Association Inc. vs Williams, Cases A10A1955; A10A1956 (Ga. App. Mar. 25, 2011) which divided the Court of Appeals panel.
A large alligator tragically killed 83-year-old Gwyneth Williams in a golf community on Skidaway Island. The alligator allegedly came from a man-made lagoon owned by the defendants.
The Court of Appeals held that, although an alligator is an indigenous wild animal, that the landowner still might have liability if it was reasonably foreseeable that building the lagoon might encourage the presence of alligators.
A vigorous dissent, however, argued that the risk of an alligator attack is minimal, that the defendants acted reasonably, and that Ms. Williams also knew of the risk and was responsible to protect herself against it.
A more narrow issue is whether the claim should be characterized as one for ’nuisance’ when the injury was the death of Ms. Williams and not the infringement of the right to peaceful enjoyment of property. The Court of Appeals held that there was no ‘nuisance’ claim, but that a ‘premises liability’ claim could go forward.
The Supreme Court granted the defendants’ petition for certiorari on October 17, 2011, but was divided in doing so; three justices (Hunstein, Carley and Benhan) dissented to the order without opinion. The Supreme Court asks the following broad question:
Did the Court of Appeals err in its holding that the trial court properly
denied in part the motions for summary judgment brought by The
Landings Association, Inc. and The Landings Club, Inc.?
Oral argument is scheduled for February 2012.
The Orders granting cert are available by clicking these links:
S11G1263. The Landings Association, Inc. v. Williams et al. : http://www.gasupreme.us/granted_apps/granted_certs/s11g1263.pdf
S11G1277. The Landings Club, Inc. v. Williams et al. – http://www.gasupreme.us/granted_apps/granted_certs/s11g1277.pdf
Jim Fletcher is a partner at the firm Merritt & Fletcher, LLC. His practice focuses on business litigation and real estate litigation throughout Georgia.
In the case of Southeast Culvert Inc. v. Hardin Bros. LLC, the Georgia Court of Appeals held that, although Hardin filed its Notice of Commencement more than 15 days of commencing work [see OCGA 44-14-361.5(b)], the timely filing of this Notice was not a condition to Southeast Culvert Inc.’s obligation to provide a Notice to Contractor.
Additionally, the Court held that there was no issue as to whether the site address listed on the Notice of Commencement was incorrect or fatally deficient. The Notice of Commencement listed a property address of 795 Union Hill Road, which was corroborated by two affidavits which attested that this was the correct property address. The mere fact that two pre-construction forms listed an address of 905 Union Hill Road did not create an issue, especially where Southwest did not deliver materials to a different location.
Accordingly, when Southeast sought to foreclose on their materialman’s lien, the Court of Appeals held that summary judgment in favor of Hardin was demanded.
Jim Fletcher is a partner at the firm Merritt & Fletcher, LLC. His practice focuses on business litigation and real estate litigation throughout Georgia, including disputes regarding materialman’s liens.
The full text of the decision follows:
Read more on Ga.App.: To Enforce Materialman’s Lien, Notice to Contractor Required Despite Late-Filed Notice of Commencement…
Senior Judge Horace T. Ward, adopting the recommendation of Chief Magistrate Judge Janet F. King of the Federal District Court for the Northern District of Georgia, in the case of Higgs v. Pendergast, ruled in favor of Mortgage Electronic Registration Systems on September 29, 2011, and held that MERS could properly transfer a security deed without transfer of the note itself. Thus, CitiMortgage (the transferee) was permitted to foreclose.
Along the way, the Court made a few significant observations and holdings:
1. “Show-me-the-note” Claim Rejected.
The Court rejected the “show-me-the-note” claim which alleged that the lender must produce the original note in order to foreclose, holding that “Courts have routinely rejected ‘produce the note’ demands, particularly where the plaintiffs have not provided any factual allegations to support a claim that the original note has been altered.” (Order at pg 35 fn 16).
2. FDCPA Does Not Apply.
The Court held that a foreclosure is not ‘debt collection’ for purposes of the Fair Debt Collection Practices Act (FDCPA) “as a matter of law.” (Order at pg 20). It reasoned that “[p]ayment of funds is not the object of the foreclosure action.” (Order at pg 21) (citing Trent v. Mortg. Elec. Registration Sys., Inc., 618 F.Supp.2d 1356, 1360 (M.D. Fla 2007). This holding was made despite the Court’s recognition that the foreclosure notice stated “Demand is hereby made for immediate payment of the total principal and interest” and stated that it was sent “for the purpose of collecting a debt.” (Order at pg 22 fn 8).
3. MERS Can Transfer Security Deed
The Court held that “…MERS has the authority to transfer the security deed to CitiMortgage and thus give CitiMortgage a present right to enforce the security deed,” reasoning that “[u]nder Georgia law, the note did not have to be transferred to CitiMortgage in order for CitiMortgage to have a present right to enforce the security deed.” (Order at pg 34-36).
Janis L. Smith, VP of Corporate Communications for MERS issued a statement and said:
€œJudge King€™s decision affirms MERS€™ legal interest in the security deed and its ability to assign its interest prior to foreclosure by a lender or servicer. … The court€™s decision also adds to the growing body of case law that shows the legality of the MERS business model in Georgia.€
The Case is James Higgs et al. v. Pendergast and Associates, P.C. et al., Case No 1:10-CV-03729 Order Doc # 15 (N.D.Ga. 9/29/2011). A PDF of the Order may be found here: http://garealestatelaw.com/?attachment_id=44
Georgia Fourth Nationally
RealtyTrac reports that Georgia ranked fourth in the month of August for U.S. foreclosures.
Only Nevada, California and Arizona had more.
Dekalb County, where I have my real estate practice, led the state with 6,757 foreclosures, followed by Cobb County with 4,724.
Their report for Georgia is available here: www.realtytrac.com/mapsearch/georgia-foreclosures.html .
More Wood Into the Foreclosure Fireplace
Jim Saccacio, RealtyTrac’s CEO, states:
“This marginal increase in overall foreclosure activity was fueled by a 14 percent jump in new default notices, indicating that lenders are cautiously throwing more wood into the foreclosure fireplace after spending months trying to clear the chimney of sloppily filed foreclosures.€
He goes on to predict that foreclosure activity is “slowly beginning to ramp back up.”
What will this mean for Georgia’s legal system?
The expected increase in foreclosure activity, though not dramatic, will lead to an increase in overall actions in the court systems including:
- More bankruptcy petitions,
- More petitions for pre-foreclosure appointment of receivers over properties,
- More lawsuits regarding alleged wrongful foreclosure,
- More foreclosure confirmation actions [ See www.ConfirmationLaw.com ], and
- More deficiency lawsuits.
The increase in REO property inventories, and the level of persons attempt to short sale their property at reduced prices, will probably continue to restrain any significant increases in property values in the near term.
Jim Fletcher is a partner at the firm Merritt & Fletcher LLC. His practice focuses on business litigation and real estate litigation throughout Georgia, including title and land disputes, foreclosures, confirmations, deficiencies, and eviction proceedings.